Strong Fort Global Ltd et Al v Solar Achiever Ltd et Al
| Jurisdiction | British Virgin Islands |
| Judge | Mangatal J |
| Judgment Date | 30 November 2023 |
| Judgment citation (vLex) | [2023] ECSC J1130-2 |
| Docket Number | Claim No. BVIHC(COM) 2022/0137 |
| Court | High Court (British Virgin Islands) |
and
Claim No. BVIHC(COM) 2022/0137
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
Richard Hacker KC, Peter Ferrer, and Edoardo Lupi for the Claimants and the Additional Defendant to Counterclaim
Andrew Westwood KC and Bhavesh Patel for the Defendants and Counterclaimants
This claim started out as a Fixed Date Claim Form, but by Order dated 6 December 2022 made by Small-Davis KC J (Ag.), it was converted to a Form 1 Claim Form, pursuant to the Eastern Caribbean Supreme Court Civil Procedure Rules, 2000 (“ the CPR”), Rule 8.1(4).
The trial took place over 3 days in April, with Closing Submissions made in writing and orally in May 2023. Learned Counsel also provided the Court with their Speaking Notes utilized in May at Closing Addresses. Cross-examination took place with the assistance of Interpreters expert in versions of the Chinese dialect. There were numerous Bundles, and documentation to which reference was made. The written Opening and Closing Submissions taken together number nearly 250 pages. This is my Judgment arising out of the trial.
The First Claimant Strong Fort Global Limited (“ Strong Fort”), the Second Claimant Solar Achiever Limited (joined also as the First Defendant) (“ Solar Achiever”) and the Second Defendant Concept Pioneer Limited (“ Concept Pioneer”) are each companies limited by shares incorporated in the British Virgin Islands (“ BVI”) pursuant to the BVI Business Companies Act, 2004 (“ the BC Act”) They will be referred to together as “ the Companies”.
Solar Achiever has in issue one ordinary share which is registered in the name of Strong Fort as its sole member.
Concept Pioneer has in issue one hundred ordinary shares which are registered in the name of Solar Achiever as its sole member.
The Third Defendant Harkom Corporate Services Limited (“ Harkom”) is a company incorporated in the BVI which is currently appointed as the registered agent of each of Strong Fort, Solar Achiever and Concept Pioneer.
The register of directors of Solar Achiever records that:
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(a) Mr. Pan Sutong (“ Mr. Pan”) was a director of the company from 23 May 2018 until 11 April 2022;
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(b) Hu Zhe was a director of the company appointed on 25 June 2018; and
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(c) Ka Yan Cheng and Qin Hou (referred to in the Statement of Claim as “ the Purported Directors”) were purportedly appointed as directors on 11 April 2022. There are disputes about the Resolutions under which the Purported Directors were appointed, discussed below.
The register of directors of Concept Pioneer records that:
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(a) Mr. Pan was a director of the company from 28 June 2018 until 1 March 2022; and
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(b) the Purported Directors were purportedly appointed as directors of the company on 10 January 2022.
On 2 June 2022 James Drury of Interpath (BVI) Limited and Ms. Lau Wing Yi of Perun Consultants Limited (together “ the Receivers”) were appointed by CNCB (Hong Kong) Investment Limited (“ CNCB”) as the joint and several receivers of:
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(a) all the issued shares of Solar Achiever registered in the name of Strong Fort; and
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(b) all the issued shares of Concept Pioneer registered in the name of Solar Achiever (together “ the Shares”), in the exercise of the powers conferred upon it by Equitable Mortgages granted by each of Strong Fort and Solar Achiever, both dated 2 June 2020 “ the Mortgages”).
At paragraph [8] of the Statement of Claim it is pleaded that pursuant to Section 126 of the Insolvency Act, 2003 (“ the Insolvency Act”), the Receivers are deemed the agent of Strong Fort and Solar Achiever, in respect of whose assets (i.e. the Shares) the Receivers were appointed.
Concept Pioneer holds 16.5% of the issued shares in a Hong Kong (“ HK”) registered company, Gold Brilliant Investment Ltd (“ GB”). GB holds the economic rights in respect of a large development project in HK known as “ the HMT Project”, in co-operation with MTR Corporation Ltd. (“ MTR”). Mr. Pan is the ultimate beneficial owner of Concept Pioneer, through his indirect 100% interest in Strong Fort and Solar Achiever. CNCB, along with a co-investor, provided HK$2 Billion (approximately US$230Million) to finance the HMT Project pursuant to an Equity Participation Agreement dated 25 June 2018 (“ the EPA”). On the same day as entering into the EPA, Mr. Pan, Solar Achiever and CNCB entered into a Deed of Undertakings and Personal Guarantee (“ DoU”), pursuant to which, Mr. Pan and Solar Achiever provided certain undertakings and Mr. Pan gave a personal guarantee to CNCB. The EPA and DoU are governed by HK law. They were later amended (in respects which the Claimants say are largely immaterial, save for the introduction of Strong Fort into the ownership structure) and re-stated on 21 August 2019.
In addition to creating liabilities in respect of the HMT Project, the DoU also imposed obligations on Mr. Pan for the satisfaction of his guarantee liability for a substantial loan advanced to Goldin by lenders connected with CNCB, used to finance a separate series of transactions (“ Privatisation Loan”).
Mr. Pan was already in breach of significant payment obligations under the DoU at the end of 2019. Further defaults occurred during 2020, none of which have been cured. In consequence, discussions took place in 2020 between Goldin/ Mr. Pan and CNCB in which Goldin/Mr. Pan made promises about remedying the defaults. Mr. Pan raises no disputes as to the existence of defaults that arose prior to June 2020.
On 2 June 2020 the Mortgages were given pursuant to a requirement by CNCB that Mr. Pan provide further collateral, to reinforce the pre-existing rights held by CNCB in respect of the shares in Solar Achiever.
Also on the same date 2 June 2020, Mr. Pan entered into a further agreement (“ Confirmation Deed”) under which he agreed to pay CNCB HK $206 M (US$23.6M) by 28 June 2020, whilst acknowledging that the full balance under the DoU would remain immediately due and payable. He failed to make the payment required by the Confirmation Deed.
The Receivers were appointed on 2 June 2022 pursuant to the powers contained in the Mortgages.
The Claimants say that following their appointment, and due to Harkom's failure to co-operate with them, the Receivers took steps to pass resolutions on 12 July 2022 (“ the 12 July Res”), removing the incumbent directors from each of Solar Achiever and Concept Pioneer, in order to appoint a new director, Zorya Limited (“ Zorya”). The validity of the 12 July Res is challenged by the Defendants.
Shortly after, the Receivers learnt that by purported resolutions bearing date 27 May 2022 (therefore apparently dated very shortly before the Receivers' appointment), Strong Fort and Solar Achiever (by written resolutions as sole members of Solar Achiever and Concept Pioneer respectively) had purportedly made substantive amendments to the Memorandum and Articles (“ M&A”) of each respective company (“ May Res” and “ Amended M&A”). The Claimants characterize the May Res as concentrating power in the directors' hands and securing entrenchment of their positions by preventing their removal save at a physical meeting, which itself may only be convened in the directors' absolute discretion. The Claimants challenge the validity of the May Res on a number of grounds. They also assert that the May Res were filed on the same 2 June 2022, the day when the Receivers were appointed, but only after the Defendants had been put on notice of the intended appointment.
After learning of the May Res, the Receivers obtained an order on 22 July 2022 made by Jack J (Ag) on an ex parte application on short notice to the Defendants, sought pursuant to section 86 of the BCA, empowering them to convene meetings of the members of Solar Achiever and Concept Pioneer for the purpose of passing resolutions intended to (i) reverse the effect of the May Res and (ii) secure Zorya's position as the sole director of Solar Achiever and Concept Pioneer. The 26 July 2022 meetings of the Subject Companies took place in accordance with the July Order. At those meetings resolutions were passed (“ the 26 July Res”). In summary, the 26 July Res: (i) revoked the May Res and restored the M&A to the position pre-dating the M&A Amendments; (ii) ratified the 12 July Res; and (iii) ratified the appointment of Zorya and removal of the incumbent directors.
The validity of the 26 July Res is challenged by the Defendants on the basis that there was no jurisdiction to make the July Order. The Claimants contend that whether or not the Court had jurisdiction to make the July Order, and whether or not it is set aside at this trial, acts undertaken pursuant to the order-including the passing of the 26 July Res are nonetheless effective.
The Claimants are seeking a variety of types of relief stretching over 7 pages. I am grateful to learned Counsel Mr. Hacker K.C., for the summary provided in the Claimants' written Opening Submissions (“ Claimants' Opening”) as follows:
“The relief sought …....
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